This document defines and compares international business and international business environment. It outlines the key differences between domestic and international business. It then discusses the various entry modes for international business, including import/export, licensing, joint ventures, and foreign direct investment. Finally, it analyzes the different elements of the international business environment, such as political, legal, economic, technological, socio-cultural, demographic, financial, and ecological factors.

1. CONCEPT OF INTERNATIONAL
BUSINESS ENVIRONMENT
BY:- PINKI VERMA

2. Difference Between International Business
And International Business Environment
International Business :- It is the purchasing and selling of the goods, commodities and services
outside its national borders.
International Business Environment :- It refers to the surrounding in which international companies
run their businesses.

3. Difference between Domestic Business
and International Business :
S.NO DOMESTIC BUSINESS INTERNATIONAL BUSINESS
1
It refers to the business where economic
transactions are conducted within the
geographical boundaries of the one country.
It refers to the business where economic transactions
are conducted across border with several countries in
the world.
2 Buyer and seller belong to same country. Buyer and seller belong to different countries.
3 Deals with single currency. Deals with multiple currencies.
4 Nature of customers is homogeneous. Nature of customers is heterogeneous.
5 Degree of risks are low. Degree of risks are high.

4. Entry Modes of International Business
Import and Export
Licensing and Franchising
Outsourcing and Offshoring
Joint Venture and Strategic Partnership
Multinational Company
Foreign Direct Investment
Entry Modes
of
International
Business
Import and
Export
Licensing
and
Franchising
Joint Venture
and Strategic
Partnership
Outsourcing
and
Offshoring
Multinational
Company
Foreign
Direct
Investment

5. Nature of International Business
Complexity
Interdependence
Dynamic in nature
Inter-relatedness
Impact
Uncertainty
Relativity

6. Advantages of International Business
Helps in the expansion of business
Helps in to increase employment
Exposure to more customers
Important source of earning foreign exchange
Helps in improving the standard of living
Help in mutual growth
Helps in the proper management of the product life cycle.
Helps in improving GDP of nation
Attract foreign direct investment

7. Classification Of International Business
Environment
Micro and Macro Environment
Domestic, Foreign and Global Environment
GLOBAL
ENVIRONMENT
(UNCONTROLLABLE)
FOREIGN
ENVIRONMENT
(UNCONTROLLABLE)
DOMESTIC
ENVIRONMENT
(UNCONTROLLABLE)
INTERNATIONAL
PRODUCTION
DECISION
(CONTROLLABLE)
MACRO
ENVIRONMENT
MICRO
ENVIRONMENT
INTERNAL
ENVIRONMENT

8. Micro and Macro Environment
MICRO ENVIRONMENT MACRO ENVIRONMENT
Meaning It refers to the environment which is in
direct contact with the business
organization and can affect the routine
activities of business straight away.
The general environment within the economy that
influences the working, performance, decision
making and strategy of all business groups.
Elements COSMIC i.e. Competitors, Organization itself,
Suppliers, Market, Intermediaries and
Customers.
PESTLE i.e. Political, Economic, Socio-cultural,
Technological, Legal and Environmental.
Are these
factors
controllable?
Factors are controllable by the business but
to some extent only.
Variables are uncontrollable.
Influence Directly and Regularly Indirectly and Distantly

9. Internal Environment
 It comprises the firm's business strategy and decisions with regard to production,
finance, marketing, human resources and research activities.
 Since these strategies and decisions are entirely made by the firm, they are
considered as controllable elements.
Domestic Environment
 Domestic environment means the environmental actors and forces existing and
operating at national level.
 It consists of factors such as competitive structure, economic climate, political
and legal factors which are essentially uncontrollable by a firm.
 Domestic environment affects firm’s domestic as well as international business.

10. Foreign environment
 Foreign environment means the factors and forces operating in a foreign country
or countries with whom a firm in domestic economy wants to have international
business.
 It consists of factors like social, political, economic, legal and cultural prevailing
in a foreign country.
 The firm can neglect them only at the cost of losing business in the foreign
markets.

11. Global environment
 Global environment means the factors operating on worldwide basis or
regional basis. Global environment is not confined to just one country but
entire world or a group of countries.
 Hence, the impact of global environment is visible in a home country as well
as foreign countries.
 It comprises of forces like world economic conditions, international financial
systems, international agreements and treaties and regional economic
groupings.

12. Components Of International Business
Environment
 Political Environment
 Legal Environment
 Economic Environment
 Financial Environment
 Socio-cultural Environment
 Technological Environment
 Ecological Environment
 Demographic Environment

13. Political Environment
 Political environment constitutes the type of government, the relationship between the government
and the business & the political risk in the country.
 There could be a dictatorship, one party system (single party system), democracy, constitutional
monarchies and so on.
 Political factors include:-
 Form of Government and Political Party System
 Political Ideology and Role of Government
 tax policy
 environmental regulations
 trade restrictions and reform
 Tariffs
 political stability

15. Legal Environment
 The international laws shall be binding in the case of a dispute are:-
 Host country laws
 Home Country Laws
 The legal systems that exist in different countries of the world are antecedents of one of the
two legal philosophies
 Common law
 Code (Civil) law
 This generally includes legal factors such as:
 Copyright law
 Fraud law
 Discrimination law
 Health and Safety law
 Import/Export law

17. ECONOMIC ENVIRONMENT
 Economic environment refers to all the external economic factors that influence buying habits
of consumers and businesses and therefore affect the performance of a company.
 Income levels need to be taken into account as they provide an indication of the purchasing
power of the market and allow companies to adapt their marketing concepts accordingly
 Some examples of economic factors affecting business are
 Interest rates
 Exchange rates
 Recession
 Inflation
 Taxes
 Demand / Supply

18. Financial Environment
 A financial environment is a part of an economy with the major players being firms,
investors, and markets.
 Monetary and Fiscal Policies:- Inflation, interest rate, various kinds of duties and exchange
rates are the variables related to the country's monetary and fiscal policies
 Balance of Payments Account:- Controls on movement of foreign exchange into and out of
their economies

20. Socio-Cultural Environment
 International business must appreciate how foreign culture is different from their
home country’s culture and how this difference is to be reflected in their business
strategies.
 There is a wide variety of social and cultural factors, some of them being:
 Level of education
 Religion and beliefs
 Consciousness about health issues
 Social classes
 Structure and size of a family
 Language
 Aesthetic
 Attitudes and values
 Different lifestyles

22. Technological ENVIRONMENT
 As technology continues to advance, companies can benefit from these breakthroughs
or face challenges in competing with them.
 Some of the most common technological factors are:
 New product development
 New organisational styles
 New management techniques
 New marketing techniques
 New production techniques
 Networks, warehouse management, electronic data interchange (EDI)
 Web/Internet

23. Ecological Environment
 Ecological factors influencing business are connected to actions and processes necessary to protect
natural environment.
 The GOI has drawn up an Environmental Green technologies, green products and green companies are
highly valued in today’s global market place.
 Ecological factors are:-
 Climate change
 Pollution
 Weather
 Availability of both non-renewable and renewable resources
 Laws that regulate the environment
 Survival of particular biological species

25. DEMOGRAPHIC ENVIRONMENT
 Demographic environment refers to a country's climate, topography,
natural resources and people.
 Common demographic variables to consider :-
 Size, growth rate, age composition, sex composition etc. of the
population
 Family size
 Economic stratification of population
 Education level
 Caste, religion etc..